Here in the US you'll find a vast majority of the land used for self-storage is owned by either investment firms specializing in commercial/self-storage real estate, MLP's (Master Limited Partnerships), or REIT's (Real Estate Investment Trusts). There are a lot of nuances to it, but essentially these are tax vehicles that buy up a bunch of not particularly sexy land, but in an industrious location that has long term potential. The issue then becomes what to do with the land while you sit on it, and the answer to that is self-storage. Self-storage warehouses are incredibly cheap to build and operate, often times the largest cost is insurance (although that's not saying much nowadays). Many MLP's/REIT's either own their own self-storage company, own a controlling share in one, or at least own a good percentage of one, or the self-storage company in and of itself is an investment firm wrapped in a thin veneer of self-storage. Thus, on top of the rent you can get a nice cut of the storage profits. It's a fantastic racket if you can get momentum, after a certain point the money essentially prints itself and you still have control of a massive chunk of land to boot. The self-storage business is also very predictable, and highly tuned, so the investment returns on both the land and the storage business are very conducive to long term wealth building.
(What you are saying is typically done though with parking lots in cities for sure for various reasons.)
"and you still have control of a massive chunk of land to boot"
Unless you have land in a particularly valuable location the fact that there is a building on it is going to contradict having someone purchase it for development purposes. It's being used. In other words "nothing to see here move along". And if it was in a super valuable upcoming area that would already be priced into the land cost and might be prohibitive.
I'd also would like to know what the time frame is for something like this to actually happen and how many times it has actually been done. That is, out of the entire self storage industry, how many locations (multi level for example - those larger buildings) have been raised for a higher use (with every tenant thrown out)? And something else built on the land which generates more revenue. Where a comparable piece of empty land was not available?
Of course it might be something that the REIT says marketing wise in order to enhance the appearance of the value of their properties. But to me it seems that the reality of whether that would actually happen (and how often) might be entirely different.
That said any links to this would be nice if you can pass along.
[1] For self storage that I am also familiar with they predictably raise the price every year. And it's not easy to move things out (you need a truck or you need to dispose of something.)
In the meantime, it would be great to have the property throw off some free cash flow, so developers build businesses on the property that involve highly generic structures that are easy to build (low investment) and easy to demolish - otherwise, the cost of demolition for any prospective buyer will reduce the value they are willing to pay for the land.
Common businesses for this purpose are parking lots/garages and storage. When you see those, it's pretty safe to assume the owner is trying to maintain as much option value as possible in the property.
Once you build a specialized structure, you lose option value on the property.
Self storage buildings around here are just cheaply built steel buildings. They are easy to dismantle.
Huh? It's not like the way those things are sold is people driving around and searching for empty lots.
The owner actively seeks to sell it, and he (or his agent) negotiates with prospective buyers who might not even have visited the location at this point, just look for something in that area.
The fact that there's a building (the garage or self storage) on the location so "it's being used", doesn't matter at all as to whether there will be buyers for it.
Heck, buyers investing in upcoming (development/price wise) places are known to buy and demolish existing residential buildings and established business to build their new stuff (an office building, a mall, a skyrise, etc) -- a parking lot is nothing compared to that.
And it even comes with a single owner to negotiate with, as opposed to buying several different residential buildings to build on.
Buy some land in the city, and old crumbling house (which usually are big), and sit on it waiting for the value to go up, or some construction company wanting do build an apartment building on it.
What to do with the land while you wait? Make it a parking lot and car wash. Lots of buildings here only have 1 parking spot per apartment, and the tendency nowadays if for middle class families to have 2 cars.
Workforce for a parking lot + carwash is abundant and extremely cheap, they don't even need to have a driving license, and barely be able to read.
Quite a lucrative business.
edit - found it http://usa.streetsblog.org/2013/05/13/how-denver-repaired-it...
I run a storage business and I can say that this is no longer the case with the younger generation. We used to store boxes of CDs, Videos, 14" Colour TVs, Desktop Computers, Hifis. Now all this is in a laptop and mobile phone, which people just take with them. We now insist on up-front payment as the items people store are worthless to sell.
90% of what we store is now boxes/suitcases of clothes and books.
But there is one clear lesson from the storage story.
If you want to be a millionaire, you'd be well advised
to look beyond what's sexy.
There are great startup ideas lying around unexploited
right under our noses. One reason we don't see them is
a phenomenon I call "schlep blindness." "Schlep" was
originally a Yiddish word but has passed into general
use in the US. It means a tedious, unpleasant task.
Say police protection and property enforcement was privatized. Under such circumstances, the cost of security for a storage facility would be substantial. But in a society where the public pays for security, it's "free" to create a business that presents an outsized target for thieves.
Add the cost of insurance, bonding, etc., and there is absolutely no "free" involved.
Not to mention the hassle of moving things to and from the storage unit!
I liked knowing that nothing was damaged in ways that weren't easily visible, like something you bought used might be.
And I don't enjoy shopping so trying to get something just like what I had is/was difficult. And it's getting harder: manufacturers change models at an incredible rate. You have to read reviews all over again, etc.
Unfortunately, I have come to the conclusion that the concept of self-storage presented here, quite similar in spirit to my local self-storage providers (henceforth: SSPs), is not reconcilable with my use-cases and fundamental needs.
To wit: All SSPs that I found were located on the outskirts of town. "Industrial estate" would describe it well. This calls for car ownership (or rental, at least) and huge transfer volumes.
But I want to spirit away a smallish box every month or so. I would like to carry it (perhaps in a bicycle trailer) around the corner. In short: I want those SSPs to be as ubiquitous as libraries.
Now, are there cities were a system not unlike to the one outlined above exists? If so, are hacker/maker spaces similarly well-distributed?
[0] Books, chiefly by virtue of their tactility, belong solidly into the latter category, as non-intuitive as it may sound: these cellulose blighters are everywhere and frankly cumbersome to circumnavigate by now.
Alas, I'm a few thousand miles short of becoming a valued customer.
Now, hopefully, you're wondering about that last 10%: It's point 2 in your "How it works":
> Pack your things carefully and take pictures of the contents.
I'm sure legal would have a word or two to say about that, but: how much would it set me back if you did that, together with providing a rough description of the box' contents? This, then, would appear on my account page's List of Boxes.
The details are devilish, of course, and supreme caution is indicated: you don't want a prominent "take-a-peek" option to adversely affect the trust of your more privacy-conscious clients.
[0] Which, incidentally, doesn't appeal to me, as I am solidly in the tarsnap aesthetics camp, but we both know what to make of that.
People have multiple cars, boats, quads, kayaks, tvs, couches, RVs, snowboards, skis... the list is endless.
I was dumbfounded that people have so much stuff, they pay money to put that stuff someplace.
I see an opportunity in 5-10 years...microapartments in former self-storage space?
You don't get your own storage unit; instead, they pick up labeled tubs from your house, and when you want them again you can request a specific one to be delivered. They don't take furniture and such.
(Disclaimer: I'm not connected to this company in any way, not even as a customer.0
To be sure, a lot of other men and women got rich before the storage men, in order for us to have more stuff than will fit in our houses.
1. http://www.selfstorage.org/ssa/content/navigationmenu/abouts...
Also as a side issue, yes you're right; absolutely nothing out there is worth much any more. The Internet and particularly eBay has laid waste to the value of things by making everthing ubiquitous.
When I was brainstorming startup ideas once I mentally kicked around "AirBNB for self-storage," but liability issues and what I saw as a trend towards minimalism among those who would have been a target demographic as reasons to discard it.
We'll see how that plays out as they age, which tends to include things like getting married, having kids, buying a house, and that kind of thing. For instance, our garage now contains 2 strollers, 2 kiddy scooters, 3 kiddy biycles of varying sizes, and one sort of push-tricycle thing. I didn't have all that crap when I was younger, either!
I heartily agree with the advice elsewhere to look at "boring" and "unsexy" stuff. It also helps if it's "far from the tree" in the sense of not picking something that's immediately related to the world you know as a programmer.
Was this ever different? Boxes of CD's, videos and tube TV's don't sound that valuable. But reading into your comment, it seems it wasn't always like this...
But then there are these examples which seem highly unlikely as the investment play involved. Browse the links on this (a typical larger storage company site) and you will see nobody is putting up a building multi story (with elevators) and hundreds of tenants with the intent of holding it to tear down. Not that like anything it couldn't be torn down if the right opportunity came along.
http://ir.extraspace.com/phoenix.zhtml?c=180054&p=irol-irhom...
But hard to believe that is actually the business model they are relying on although it could of course be a future upside.
I kept some things that were keepsakes, but the rest ... out with it all. Which also saved me $135 a month in rental costs.
As for the 10%, we have indeed found that quite a few customers end up not taking pictures, even though it's a requirement to qualify for the protection plan.
We would be happy to take those pictures, but I wonder if there's a way to do it so that it doesn't interfere with the customer's privacy. Drivers taking the pictures upon pickup comes to mind.
AirBnB for storage would be awesome. Wonder if I could make enough to cover the cost of an an outbuilding?
The interesting part is that most of the parking lots are owned by groups of moderately wealthy folks (doctors, mid-level corporate execs) who had bought super cheap in the 70's. The income they are able to make risk-free is a huge obstacle to redevelopment.
As an example, there's lot next to my old office that gets about 250 cars into a half-block lot. At six dollars/car/weekday plus extra money on weekends that's about $400k/year before taxes split among a dozen investors. (An incredible yearly return when you consider they probably paid less than $250k to buy a run-down building and level it back in the 70's.)
If somebody wants to buy that lot to build apartments, they're going to have two hurdles.
First, all of these guys are probably retired, so they're looking for risk-free income rather than capital. With interest rates below 3%, they're going to ask for $12 - 15 million so they can invest it in bonds and still get the same income. That's a ton of money just to buy land.
Second, most of these partnership agreements are drafted such that every partner has to agree to sell rather than a majority. If one guy holds out for $20 million, it could scuttle the deal.
Slowly but surely the parking lots are being replaced, but it's happening much more slowly than it should.
DVDs have a bit of crazy market. Some distributors (Disney and Criterion especially) do a short limited run. The 2nd hand stores rely on these gems in a big box of junk to make profit.
[0]storage wars
When my family lived in Bangladesh, we once had a band of thieves (in a van/bus with guns) try to break down our gate. One of those would roll through the security at your typical storage facility.
Now add the cut to the local warlord, who "respects" your area so long as you "respect" his due.
Oh, wait, that's starting to look a lot like taxation, police services, rights enforcement. Just without the actual rule of law, good governance, and an independent judiciary.
Really, I do not understand this notion that police services, etc., are free. We pay for them with every dollar we earn and every dollar we spend.
As the man said, I like paying taxes, with them I buy civilization.
When items like those are no longer needed the trend among my peers is to donate (to friends with younger kids) or liquidate (on Craigslist).
It kills me how much money is dropped on kids stuff that is not used for a significant period of time.
craigslist is fine if you have time to sift through things. I'm looking for a site that does it better with filtering to cut out the cruft. Maybe FOBO but a specific subset?
Also, no kids yet. =)
-pricing is rational and stable. In such markets, people just know 'what stuff goes for'. -where the savings of buying used is >$100, then the transactional costs of an email, a couple texts, a trip to the ATM, and a short drive are worth it to a lot of people. -no taxes, fees, waiting for your money, account signup, email subscriptions, app downloads, etc. etc.